Online money transfer in India set to get cheaper

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Daniel Webber
Daniel Webber
Founder & CEO
Daniel is Founder and CEO of FXcompared and has 18 years of experience in the international finance world focusing on cross-border payments, technology and the property sectors. Daniel is widely… Read more
  • Reserve Bank of India announces an end to fees levied on two types of transfers, the Real Time Gross Settlement System (RTGS) and the National Electronic Funds Transfer (NEFT) system
  • Savings of up to 50 rupees per transaction could be enjoyed
  • Move is designed to stimulate digital transactions

 

The Reserve Bank of India has announced that it will waive fees on a pair of major online money transfer types.

Currently, the Bank levies fees on customers who intend to use remittance services on other platforms.

However, the two types of transfers affected, the Real Time Gross Settlement System (RTGS) and the National Electronic Funds Transfer (NEFT) system, will now be cheaper across the board thanks to the centralised fee waiver.

According to media sources, the reason for the move is due to an increasing shift towards digital.

By removing barriers between making a transaction and settling it, it is hoped that more users will opt for expedited digital services.

From the customer’s perspective, this move could be set to save a high amount of cash.

One calculation, which focused on how the State Bank of India’s customers would be affected, suggested that fees of between one and five rupees were being charged on each NEFT transaction.

For each RTGS transaction, the figure was even higher – with amounts of between 5 and 50 rupees being charged.

Technically, the current charges are not levied on customers directly, but on banks. In practice, however, the banks tend to pass on the cost to customers.

The news was announced in the Statement on Developmental and Regulatory Policies, which is a publication produced by the central bank.

Press reports suggest that banks in India will not be permitted to continue to charge customers, and that financial institutions in the country will be spoken to within a week regarding the matter.

NEFT is an India-wide system designed to help cash transfers to occur smoothly. It is possible for all types of customers to use this system, including firms and corporations.

However, it is also open to individuals. All it requires is for each customer to have access to a bank account at a participating Indian institution.

RTGS, meanwhile, is an expedited mode of money transfer which enables customers to send cash as soon as the order is placed – hence the “real time” description.

While NEFT can be used for transactions of any size, RTGS is designed specifically for transfers which are large in nature. It is not possible to send an amount lower than two lakh rupees, for example.

With the move designed to encourage a shift to digital, it is hoped that more secure and speedy transactions will become possible. However, press coverage on the matter has sounded a cautionary note to customers – reminding them to always be careful before signing up to a transfer institution.

The remittances space is an interesting one, and one that holds a lot of promise. To learn more about what institutions like the Reserve Bank of India do to help their customers, check out our news page.


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